As mixed-use projects revive, some are scaled back

Projects adjust to the timesPlans revived, but ambitions scaled back

NANCY SARNOFF, HOUSTON CHRONICLE |
July 18, 2011

Developers are reviving some of the mixed-use projects that were shelved when the economy hit the skids. But this time around, some are less ambitious or are taking on a new focus.

Projects once planned with office buildings, hotels, condos and hundreds of square feet of retail space are being scaled back. Others are being rolled out at a much slower pace — a reflection of today's real estate market. Some of the developers have shifted, too.

High Street, a $105 million project that had broken ground not long before it was halted in 2008, is being restarted later this year by the Dinerstein Cos.

Now called Millennium High Street, the project will consist of 336 luxury apartments and 27,000 square feet of retail space. It was originally planned by a Fort Worth-based developer with 100,000 square feet of retail space, 80,000 square feet for offices and 233 residential units.

Construction will start again on the Inner Loop Westheimer site in the fourth quarter, said Brian Dinerstein, a partner in the company.

The retail broker leasing the project said more shop space could be supported were it not for the shaky capital markets.

On a site just west of the Dinerstein project, a California developer has been planning a mixed-use project that's also moving forward, though slightly altered.

On a site just west of the Dinerstein project, a California developer has been planning a mixed-use project that's also moving forward, though slightly altered.

San Diego-based Oliver- McMillan has removed a luxury hotel component from the original plan of what was once called River Oaks District. The project is now known as 4444 Westheimer and will include retail, office and residential space, a company representative said.

A mixed-use project slated for Rice Village is also back on the table.

Today, though, it has a different developer, less retail space and apartments in place of condos.

Houston-based Hanover is about to start construction on the five-story complex,called Ashton Rice Village,which will have 13,000 square feet of retail space on the ground floor.

Changing market

The scaled-back projects reflect how the market has changed.

While some retailers are still expanding, many aggressively opened new stores during better economic times and are now sitting on the sidelines.

There were 308,603 square feet of new shopping space built in the first half of the year, according to a report from CB Richard Ellis. At the peak in 2009, developers built almost 7.5 million square feet.

Hanover announced its plans for the Rice Village project late last year. The previous developer put the project on hold in 2008 as economic uncertainties and tumultuous financial markets kept it from securing a loan to build it.

Easier projects to finance

While financing a large mixed-use development remains challenging, securing capital for an apartment complex is relatively easy, experts say.

The market for rentals is getting stronger as mortgage lending standards remain tight, homeowners who lost their properties to foreclosure need a place to live and a younger population relocates here for jobs.

"Houston's in good shape. There's great household formation and good job growth," Dinerstein said.

Overall apartment rents have increased by 3.4 percent over the last 12 months, with rates for the nicest properties reporting even stronger gains, according to Apartment Data Services.

Veteran Houston developer Ed Wulfe, too, has had some hiccups with BLVD Place, a partially built mixed-use project at Post Oak Boulevard and San Felipe. But he says he's planning the same amount of retail space in the project.

"We are in the final stages of completing our plans and financing to kick off the next phase of BLVD Place this fall," he said.

The addition includes a Whole Foods Market, additional retail and restaurant space and about 50,000 square feet of office space.

Wulfe said retailers are out looking again.

The developer of Regent Square, a proposed mixed-use project at Dunlavy and Allen Parkway, said the company is "in discussions with several significant tenants."